Shell teams up with Chinese energy giant for first ever shale gas production sharing contract.

CNPC and Shell embark on shale gas project

China National Petroleum Corporation (CNPC) and Shell’s Chinese subsidiary have signed their first ever shale gas Production Sharing Contract (PSC).

The state-controlled parent of Petrochina agreed with Shell to explore, develop and produce shale gas in the Fushun-Yongchuan block in the Sichuan Basin, China. The area will cover approximately 3,500 sq km, Shell announced on 20 March.

“We are delighted about this new milestone in our strategic cooperation with CNPC,” said Shell CEO Peter Voser. “China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality.”

China recently set a target of producing 6.5bn cubic meters a year of shale gas by 2015 and plans to produce between 60bn and 100bn cubic meters a year by 2020.

Shell already has shale projects worth USD 400m in the pipeline with CNPC. The energy giant also plans to drill 25 wells this year.

Zhao Zhengzhang, Vice President of PetroChina Company Limited, and Lim Haw-Kuang, Executive Chairman of Shell Companies in China, signed the PSC at a ceremony in Beijing.